Consider the following bond issues: Bond A: 5% 15-year bond Bond B: 5% 30-year bond Neither bond has an embedded option. Both bonds are trading in the market at the same yield. Which bond will fluctuate more in price when interest rates change? Why

Residual claim: shareholders get only what is left-over after everyone has been paid. Discount rate: the rate at which present and future values are traded off. Future value of cash flow: C x (1+ r)^n. R= (FV/PV)^1/n - 1. Present value= C/(1+ r)^n. Compound interest: exponential growth in wealth, initial amount of money + the interest that has been added the previous years. Perpetuity, Growing Perpetuity, Annuity: multiple payments overtime, same amount, regular interest. NPV: the difference between and investment's value and its cost. Positive NPV=investment yes; NPV=0 project earns the required rate. . IRR measures the average return on the investment: accept project if IRR is greater than the discount rate(minimum return you want). Payback period: how much time it takes to make the money back. Discounted payback:accounts for the time value of money. Maturity date: final payment date. Coupon: regular interest payment. face value: quanto vale il bond. coupon rate: annual coupon payment/face value. coupon payment: (coupon rate x face value)/ n of coupons.YTM: total return when the bond matures. Debenditure: bond not backed. putable: right to sell it back. Collable bond:company can buy back.  c= coupon. T-bills= short term (<1yr) T-notes 1 o 10yr T-bonds= >10yr. Preferred stock, no voting rights. Growing perpetuity current price of stock R: required return. D: Pxr P: current price of the stock Capital Gains Yield: This is the growth of the stock price over time. Dividend yield = 𝐷𝑡+1/𝑃𝑡 Capital gains yield = (𝑃𝑡+1 − 𝑃𝑡)/𝑃𝑡Total percentage return = Dividend yield + Capital gains yield. Pt share price at the beginning of the year. Dt: dividend paid during the year. CAPM- relationship between expected returns and risks for assets beta: how much the stock moves compared to the market. Cost of equity:

cost of equity: rr investors demand when buying shares. Bond price  bond price formula What is the net present value of a project that has an initial cash outflow of $34,900 and the following cash inflows? The required return is 15.35 percent.